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Universal-EMI Merger Approved On Two Continents: What It Means

And then there were three.

Friday, news broke that both the Federal Trade Commission in the U.S. and industry regulators in the European Union had officially approved the long-awaited (and oft-debated) acquisition of EMI by Universal Music Group. The merger makes the largest global purveyor of recorded music even larger, giving Universal a whopping 40 percent of the market share, and effectively reducing the number of major music holding companies to three: Universal, Sony and Warner Brothers (listed from largest to smallest). This means that going forward, if you buy a record produced by any corporate label, chances are it will be owned by one of these three players, because the three together constitute a full 90 percent of the market.

Rather surprisingly, the FTC approved the deal with no stipulations, while the European Union was not so generous. Under the terms of EU approval, Universal is required to sell off about a third of EMI’s current holdings, which amounts to 66 percent of EMI’s revenue generated in Europe, to comply with EU regulations. The specifics are complicated, of course, but for those interested, it means Universal loses the rights to Parlophone label artists such as Kylie Minogue, Gorillaz and Coldplay, as well as EMI’s 50% stake in the Now! That’s What I Call Music compilations; but in the process, Universal gains such assets as the Beatles catalog, the Capitol Records and Virgin Labels, Abbey Road Studios, and of course the contracts of some of the biggest artists in the business. Meanwhile, according to Wall Street Journal, companies are already lining up to purchase the assets that are soon to go on the market.

Seems a bit more complex than a major league trade, doesn’t it?

As to what it all means to us here on the ground, opinions are mixed. Critics of the deal insist that fewer competitors in the mainstream market may eventually translate to higher prices for consumers, and possibly less negotiation power for the artists. In particular, it has generated a lot of concern over the newer, evolving digital sales market, because it places Universal as one of the loudest voices at the table, making it all the more difficult for independents to voice their own concerns or possibly to present new platforms. It also naturally makes the playing field a little bit more intimidating for independents in general, who might feel a little more bullied into playing by the rules of the “big boys.” The FTC dismissed these sorts of concerns, claiming that the “limited direct competition” between the conglomerates themselves suggests that competition itself would not be restricted in the digital market by the merger. The EU had a different take, hence the required sell-off; but critics feel even this was not enough.

Still, given the checkered history between the music industry and the government (they’ve been slapped for anti-trust violations in the past), this merger has bred concern and distrust, at the very least. Only time will tell if consumers and artists will eventually feel the effects in their wallets.

What do you think? Does the merger between Universal and EMI help the industry, or hurt it?

 


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About the Author

on MUSIC IS MY OXYGEN WEEKLY.

David Tillman is an independent composer/arranger whose primary work involves writing jingles for commercials for radio and television, with several film and television placements to his credit as well. David has a fascination for all things related to the music business and the music industry in general, an obsession which his wife finds to be mildly unhealthy at times. His personal tastes in music are in electronica and industrial rock, and include The Chemical Brothers, Daft Punk and Nine Inch Nails (he loves that Trent Reznor is writing soundtracks!). When not in his office or in his man-cave, David enjoys skiing, hiking, the occasional game of golf, and sometimes just lounging by the pool. David lives with his wife and three children in Los Angeles, CA.

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